QE must be used to boost green economy, says economist MEP

Green economist and MEP, Molly Scott Cato, says a quantitative easing (QE) scheme for Europe will be a hugely missed opportunity and replicate the errors of a similar package in the UK. The European Central Bank (ECB) is likely to agree a new round of QE today in an attempt to tackle stagnation and deflation in the Eurozone. However, Dr Scott Cato warns that very little of the money created through QE – which aims to stimulate the economy by encouraging banks to make more loans and in turn increase investment – will boost the real economy.

Dr Scott Cato, who sits on the Economics Committee in the European Parliament and is Green Party speaker on finance, said:

“The problem with conventional QE is it is used to buy government bonds from the financial markets. When the Bank of England launched its QE programme the newly created money went directly into boosting bond and stock markets. This had the effect of making the wealthy wealthier while the majority who are asset-poor gained nothing.

Dr Scott Cato is calling instead for a different approach: a green quantitative easing package that would stimulate the green economy, boost employment and tackle climate change. Dr Scott Cato said:

For Greens the justification for creating new money would be that it is invested in the transition to a sustainable economy. It could be used to develop green energy infrastructure, improve our railways, or insulate our leaky homes. The mechanism to make this work would be for the European Investment Bank (EIB) to produce new Green Bonds, thereby increasing its lending power. However, this increased liquidity should be directly linked to lending to green businesses. This would have the effect of injecting money directly into the green economy.”

Dr Scott Cato concluded:

“Those of us who have decried the way the policies of austerity and monetary stimulus have been used to benefit the rich at the expense of the poor should be arguing now that, when the ECB loosens the purse-strings, it must use the principle of sustainability to guide how QE should be implemented.”

For a longer article by Molly Scott Cato MEP exploring the impacts of QE and the Green QE alternative see her Huffington Post blog: As Europe Eases Into Quantitative Easing, It’s Time for Green QE